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Indonesia’s Troubles

Can Indonesia’s President Megawati Sukarnoputri turn the country around?

July 31, 2001

Can Indonesia's President Megawati Sukarnoputri turn the country around?

The terms of office for Indonesian presidents used to be conveniently measured in years — or even decades. But the two successors to Suharto, whose 32-year presidency ended in 1998, have seen their presidential terms end in a matter of months. Suharto’s handpicked successor, B.J. Habibie, was able to hold on for 17 months. And although Abdurrahman Wahid lasted three months longer, he too was equally unable to pull the country out of economic and political chaos. Our new Globalist Factsheet examines the uphill struggle facing Megawati Sukarnoputri, the country’s new President — and daughter of Indonesia’s independence leader Sukarno.

Where does Indonesia rank in the global economy?

As of 1999, with a a GDP of $125 billion and a population of 207 million, it is the fourth-most populous country in the world — and has the 31st largest economy.

(World Bank)

What else is significant about Indonesia from a global perspective?

As of 1999, about 40% of the world’s shipping volume passes through Indonesian waters.

(USA Today)

What is the state of democracy in Indonesia?

In 1999, the first democratic elections took place in 40 years.

(Washington Post)

What about religion as a political factor?

As of 2000, more than 85% of Indonesia’s 216 million people are Muslim. Even though the country has the world’s largest Muslim population, it is not officially an Islamic country.

(Washington Post)

What was President Suharto’s economic record?

Over the 32 years of Suharto’s presidency — which ended with his resignation in 1998 — Indonesia achieved a 7% average annual growth rate.

(Washington Post)

How did the 1998 economic crisis affect the Indonesian people?

When President Suharto took over Indonesia back in 1965, the average worker made the equivalent of $260 per year. By June 1998, the average worker made $1,000 per year. Six months later as a result of the Asian financial crisis, 30 years of progress had disappeared — and the average worker was back to earning $260 per year.

(Washington Post)

Was there any one variable that might have helped predict Suharto’s rapid fall?

“We forgot about economic chaos.”

(CIA official, referring to agency scenarios about Indonesia’s future, May 2000)

Which other troubling problems have surfaced?

Since 1997, 39 million Indonesians have lost their jobs. By comparison, just over 6 million people are unemployed in the United States in 2001.

(The Guardian)

How poor is Indonesia now?

As of 2001, 34 million people are defined as poor in the United States by U.S. standards. In contrast, Indonesia has about 100 million people that live just above or below the poverty line.

(The Guardian)

How large is Jakarta’s debt?

The ratio of government debt-to-GDP in Indonesia has increased from less than 25% in 1996 to over 90% in 2000.

(World Bank)

Is that the total size of the country’s debt mountain?

Indonesia’s private debt and public debt together collectively amounted to $262 billion — or 170% of gross domestic product — at the end of 2000.

(International Herald Tribune)

How does this compare to the United States?

In 1992, the U.S. government incurred its biggest single-year budget deficit of about $290 billion.

(U.S. Congressional Budget Office)

How does Indonesia tackle its debt?

As of 2001, about $9 billion of Indonesia’s state budget is spent on servicing the government’s foreign and domestic debts. On average, each Indonesian citizen thus pays $45 annually to cover this debt — while they each receive only $2 worth of health service.

(Jubilee 2000 Coalition)

What about the distribution of wealth in Indonesia?

As of 2001, 4% of Indonesia’s population account for 73% of market capitalization.


How are the country’s companies faring under the crisis?

“Companies never close here. We call them zombie companies — they are dead, but still walking.”

(Jakarta-based consultant, on Indonesian corporate practices, March 1998)

What about the role of Indonesia’s military?

National defense expenditures amounted to 2% of Indonesia’s GDP in 2000 — or about $1.2 billion. However, the army claims that this amount does not suffice to pay the military’s large operations. It thus continues to operate many illegal commercial businesses — with the knowledge of the Indonesian government.

(Financial Times)

Why has Megawati Sukarnoputri kept mostly silent during the latest stand-off with ex-President Wahid?

“She believes in an economy of words. She thinks most talk is noise.”

(Dennis Heffernan, Jakarta-based political consultant, July 2001)

What is Megawati’s political experience like?

As the daughter of Indonesia’s founding father President Sukarno, the country’s current president Megawati Sukarnoputri and former florist lived in the palace until she was 20 years.

(Washington Post)

And finally, what does the country’s new President reply to those who ridicule her political inexperience?

“It appears that I am considered to be a housewife. I say to those people who belittle housewives: What’s wrong with that? It doesn’t mean a housewife doesn’t understand politics.”

(Megawati Sukarnoputri, Indonesia’s President, July 2001)